Regulation and Internet Use in Developing Countries

Abstract

Concerns about a worsening "digital divide" between rich and poor countries parallel the hope that information and computing technologies (ICTs) could increase economic growth in developing countries. Little research, however, has explored ICT growth beyond noting that it is correlated with standard development indicators, and no empirical research has explored the role of regulation. In this paper, Scott Wallsten uses data from a unique new survey of telecommunications regulators and other sources to measure the effects of regulation on Internet development. Controlling for factors such as income, telecommunications infrastructure development, ubiquity of personal computers, and time trends,Mr.Wallstenfinds that countries requiring formal regulatory approval for Internet Service Providers (ISPs) to operate have fewer Internet users and hosts than countries that do not require such approval. Moreover, countries that regulate ISP final-user prices have higher Internet access prices than countries without such regulations. These results suggest that developing countries' own regulatory policies can have large impacts on the digital divide.Technology and Industry, Regulatory Reform, Other Topics